Gold May Be Putting In An Important Bottom

Bill Downey: The bull camp sees a higher low and the bear camp sees a lower high from the Monday gold trade. Granted gold managed to bounce off the lows posted last week but the source of the rally was in question. Some bulls claim the recovery was revived safe haven buying interest in the wake of a failure to move closer to a US debt ceiling deal from over the last weekend. Others suggest that the gains Monday were the result of developing weakness in the Dollar, which in turn can lend support to physical commodity markets. While the safe haven or flight to safety argument haven’t played loudly with the gold market over the last two months, the approach of the October 17th default deadline combined with warnings from the head of the IMF and JP Morgan regarding the consequences of an actual default might have rekindled financial market anxiety.

US DATA IN SHUTDOWN
The on-going government shutdown is cutting off the flow of several important data reports. The few releases coming out are, moreover, being met with some skepticism as the on-going stand-off in Washington raises concerns that this could exert a more significant drag on economic activity. Beware of double sided risks, however. Downside tail risks are well known, but equally if a solution is found quickly, investors could be caught in a whirlwind as asset prices re-price both recovery and Fed tapering. It seems markets are pricing a very prolonged delay. With mid-term elections due in November 2014, prolonged delay however seems the politically most dangerous tactic for the Republicans.

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R1 and R2 represent 1st and 2nd standard deviations from the pivots for resistance and the S1 and S2 represent 1st and 2nd standard deviations from the pivots for support.

Gold Short Term

the Monday bounce was right to the Sept low of 1291 and our flush out line. As long as we are below 1291-1303 the short term trend is down. Resistances on Pivots are 1286-1300 but on chart lines that 1291-1295 area is 1st resistance. 1303-1309 would be the 2nd resistance. On a support basis, the GOLD TREND lines are the “SLOPE” in which price support lines have existed since the June lows and are parallel to the original channel line that took gold from 1180 to 1434. I’ve drawn in a line on the action (Lowest gold trend line). I’m not sure if this line is going to hold but I drew it in because the 1266 low so far this week is in “slope” with last week’s low. It’s too early to tell if it’s going to be a VALID line. The WINDOW for a the next short term CYCLE is now open as it’s 72 hours from the 18th in Asia. See more in cycle’s portion. Tuesday’s close was 1272.80 — THIS IS NOW THE 2ND 1272 CLOSE IN AS MANY DAYS as 1272 has the same relation as 1322 did in September.